Wholesale Pricing , " It sold for what " !!!! When will the crash come ?

Replies to This ADM Discussion

Permalink Reply by Philip Zelinger on October 16, 2009 at 5:53am

Hi Tim,

The arbitrary conjecture required to answer your question based on "what was" vs. "what is" and "will be" drawn from an individual opinion - professional or otherwise - is flawed by design. That is no slight on you for raising a very opportune and intelligent question since us "car guys" know that we make our money when we buy a vehicle, not when we sell it, but rather to surface a solution that will answer the question for tomorrow which is what we should all be planning for today - if not yesterday!

In my opinion - now that I have confessed that it is worthless - used car prices will continue to fall based on historical experience at this time of year, increasing new vehicle inventories with new gas conscious model introductions and the concern over the economy for a number of reasons that I will cover in another post. That said, the real solution is to accept that managing a used car inventory from the appraisal process to the marketing to the reconditioning to the pricing and other related responsibilities of inventory management has matured from an art to a science which should be applied by any used car dealer that plans to survive in today's challenging auto industry.

Another consideration when looking into your crystal ball to determine future wholesale values is that the convenience of online inventory sites open to private sellers, government intervention into what "was" our free marketplace and consolidations in the retail sector will all have an impact on the wholesale price of vehicles. Trade-ins will be harder to find and/or buy and government subsidies for new vehicles may push the used car value down as well now that governmment motors is your competition and they don't have to consider profits.

With all of that to consider the only solution is to turn to technology and processes to supplement - not replace - the people part of the quotient. Inventory management/marketing applications like FirstLook, vAuto,eCarList,AAX and others now provide an efficient means to instantly access information on both internal experienced historical results as well as those for the marketplace that are now accessible on the WWW. More importantly, their ability to manage and monitor the inventory acquisition and disposition costs while taking into consideration all of the variables including individual manager discretion in the process as well as reconditioning, marketing and competitive pricing to prevent aged units provide the fluid answer that should be applied to your question.

Why guess and rely on looking through the rear mirror to determine if you made money on your last purchase or worse, live with a fluid market by establishing a static bid on a vehicle that by definition you paid more than anyone else was willing to pay at the time and that starts depreciating the minute you buy it?

The problem is more relevant than the question and/or the answer and the solution lies in the use of processes like FirstLook that consider "Customer Optimization" to instantly post your used cars into your online marketing plan with competitive pricing and feature/benefit copy relevant to your customer to make your vehicle stand out amongst the millions on the Internet Super Highway. Science like that of vAuto that creates a dashboard to help you drive your inventory and profits and the ability to rely on the tools that have developed to provide efficiencies and safegaurds into the wholesale and the associated retail pricing of your vehicles will help determine what you should pay for a vehicle to insure a fast turn and improve profits.

I hope that I answered your question, but more importantly I hope that my reply provided you a solution because, after all - what are friends for!

▶ Reply to This

Permalink Reply by Tim Elliott on October 16, 2009 at 6:10am

Phil ,

Ahhh, but I do value your opinion, though you think my question rational is flawed.

Your thoughts are based on facts, not feelings. One of the great values of all the inventory market data available (Vauto) is real time market intelligence. We no long have to make decisions on what we feel, but what we know . True informed decisions make for long term success.

However, I do disagree. I believe price will continue to rise due to less supply and more dealers looking for cars.

▶ Reply to This

Permalink Reply by Philip Zelinger on October 16, 2009 at 6:18am

Thanks for the confidence in my opinion but now I have to accept the responsibility - bummer! The other variables that impacted my opinion - worthless or not - are the limitations being placed on dealer floor plan amounts and dictated turn of inventory to prevent pre-payments plus the percentage of book value limits on both the wholesale loan and the eventaul retail loan amount and terms offered to the customer.

We sell - and buy - boths cars and money and the economy suggests that the money part is getting tight! Combine that with the competition on the WWW by both private sellers and dealers liquidating their inventories - new and used - for reduced margins and the need - not want - for customers to hold onto their vehicles longer and I believe that the wholesale and retail prices will have to come down to spark that "supply and demand" formula into firing.

Of course I could be wrong - which is why I rely on the saftey valves offered by FirstLook and vAuto!

▶ Reply to This